Low Unemployment - Learning Objectives

After studying the portion of this blog devoted to the macroeconomic policy goal of low unemployment, you should be able to:

· define unemployment.
· explain why low unemployment is an important macroeconomic goal. (Explain why high unemployment is bad.)
· illustrate full employment as a point on a production possibilities frontier.
· illustrate unemployment as a point inside a production possibilities frontier.
· explain how the Bureau of Labor Statistics (BLS) calculates the unemployment rate.
· list and explain the three categories into which the Bureau of Labor Statistics (BLS) divides the adult population.
· define the labor force and the labor force participation rate and explain what percentage of the U.S. adult population is in the labor force.
· define the unemployment rate.
· calculate the labor force participation rate and the unemployment rate from data on the total (adult) population, the labor force, unemployed workers, and employed workers.
· define the natural rate of unemployment, state its current estimate, and explain the conditions under which the economy is considered to be fully employed.
· list and explain the criticisms of using the unemployment rate (as calculated by the BLS) to measure unemployment.
· define discouraged workers and explain how they cause the unemployment rate to underestimate actual unemployment.
· define underemployment and explain how it causes the unemployment rate to underestimate actual employment.
· explain how the method of collecting unemployment data tends to overestimate the unemployment rate.
· illustrate unemployment with supply and demand curves in the labor market.
· explain the difference between the market wage rate and the equilibrium wage rate.
· provide explanations for the market wage staying above the equilibrium wage.
· define minimum wage laws, price floors, labor unions, collective bargaining, a strike, and efficiency wages.
· list the three basic types of unemployment.
· define frictional unemployment, explain its causes, and explain how frictional unemployment can be reduced.
· define job search.
· define unemployment insurance and explain how it unintentionally increases frictional unemployment.
· define structural unemployment, explain its causes, and explain how structural unemployment can be reduced.
· define cyclical (Keynesian) unemployment, explain its causes, and explain how cyclical unemployment can be reduced.
· define the business cycle and explain its relationship to cyclical (Keynesian) unemployment.
· provide a brief biography of John Maynard Keynes, explain his major contribution to economics, and state the title of his most famous book.
· define aggregate demand and state its components, based on the purchaser of the newly produced goods and services.
· define expansionary monetary and fiscal policies and explain how they can be used to increase aggregate demand.
· explain the difference between classical and Keynesian economics.
· explain why the macroeconomic policy goal is low unemployment rather than no unemployment.
· list and explain the appropriate macroeconomic policies for reducing unemployment.

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